Policy Name:	Temporary Labor Services (Temp or Staffing) Agency
Policy #:	EP-20-04
Code/Rule Reference	Ohio Revised Code (ORC) 4123.01 and Ohio Administrative Code (OAC) 4123-17-05, Appendix A; 4123-17-08; 4123-17-13; 4123-17-15.
Effective Date:	July 17, 2023
Approved:	Rex Blateri, Chief of Employer Services
Origin:	Employer Policy
Supersedes:	Temporary Labor Services (Temp or Staffing) Agency policy dated December 5, 2015.
History:	Revised: July 17, 2023; December 1, 2022; December 5, 2015; March 12, 2008. New policy issued February 2007.
Review Date:	December 1, 2027

 

 

I.      Policy Purpose

 

This policy outlines the Ohio Bureau of Workers' Compensation (BWC) requirements for temporary labor services agencies (temp agencies or staffing agencies) applying for coverage, classifying employees, and reporting payroll.

 

II.    Applicability

 

This policy applies to BWC Underwriting, BWC Premium Audit, temp agencies, public employer taxing districts (PEC employers), private employers (PA employers), and their authorized representatives.

 

III.   Definitions

A.    Temporary labor services (temp or staffing) agency: An entity that, as part of its trade or business, provides individuals, or uses a digital network staffing platform to connect individuals, to unrelated third-party clients to perform services on a temporary basis and derives revenue or otherwise benefits from providing such individuals. Individuals provided by the temp agency are employees of the temp agency regardless of the temp agency’s use of a digital network staffing platform. A temp agency is not:

1.    An alternate employer organization (AEO) as defined in ORC Chapter 4133; or

2.    A professional employer organization (PEO) as defined in ORC Chapter 4125.

B.    Digital network staffing platform: Any online-enabled application, software, website, or system offered or used by a company that enables the prearrangement of labor services with an unrelated third-party client.

C.   Unrelated third-party client: Entity unrelated to, or not sharing common ownership, management, or control with the temporary labor services agency that meets the definition of employer as defined by ORC Chapter 4123, and which is provided individuals, that do not meet the definition of independent contractor, by the temporary labor services agency to perform services on a temporary basis. For this policy, “unrelated third-party client” and “client” have the same meaning.

D.   Independent contractor: An entity with whom the principal/owner directly contracts to perform a certain task or tasks. Independent contractors are generally engaged to perform operations not within the usual trade or business of the principal/owner and such tasks are contract-specific.

E.    National Council on Compensation Insurance (NCCI): An organization that gathers data, analyzes trends, and provides objective insurance rate and loss cost recommendations for the workers’ compensation industry. BWC uses NCCI’s classification system, however, BWC develops its own rates.

F.    Classification codes: NCCI four-digit codes used to classify business for workers’ compensation insurance. Also referred to as class codes.

G.   Basic classifications: Specific classification codes that describe the business of an employer.

H.   Industry group: Used in calculating an employer’s premium rate and a factor in some program participation, an industry group is the main business pursuit of an individual employer; e.g., construction or transportation. NCCI classification codes are grouped into ten industry groups, set forth in OAC 4123-17-05, Appendix A.

IV.  Policy

A.    Temp agency application for coverage.

1.    Temp agencies must use the Application for Ohio Workers’ Compensation Coverage (U-3) to apply for coverage and mark “Yes” to the “Temporary Service/Staffing Agency” question found under the “Special employer types” section of the U-3.

2.    BWC processes a temp agency’s U-3 application in the same manner as other business entities by following the Application for Coverage (U-3) policy.

3.    A new temp agency may request one policy per industry group for a total of ten policies.

a.    When BWC issues a policy by industry group, all classification codes assigned to that industry group, and only those, will be assigned to the policy, except for classification code 8810 – Clerical Office Employees.

b.    Temp agency industry group policies cover the entire state.

c.     BWC will include the industry group type in the employer’s name to effectively manage each policy.

4.    An existing temp agency may request one policy per industry group for a total of ten policies.

a.    Payroll and claims from existing policies will be transferred to the appropriate industry group policy.

b.    The historical payroll and claim information will be used to develop the experience modifier for the new industry group policies.

5.    Once a temp agency requests one policy per industry group, the change is permanent.

B.    Temp agency classification code assignments.

1.    As set forth in OAC 4123-17-08, more than one basic classification may be assigned to a temp agency. OAC 4123-17-08 further states that temp agency employees assigned to clients must be classified the same as the client’s direct employees performing the same or similar duties.

2.    It is the temp agency’s responsibility to obtain classification code information from their clients or potential clients.

3.    A temp agency must contact BWC’s Classification Unit to have a classification code added to its policy.

4.    There are exceptions where BWC will add a classification code to the temp agency’s policy that is not assigned to the client’s policy.

a.    A temp agency employee is required to perform duties outside the normal scope of the client’s business.

i.      For example, the client is classified as 8017 Store – Retail. The temp agency provides the client clerical employees that would be classified as 8810 Clerical Office Employees. BWC adds classification code 8810 to the temp agency’s policy, but 8810 is not added to client’s policy.

ii.     Another example, the client is classified by the 8810 standard exception. The temp agency provides the client janitorial service employees. BWC adds classification code 9015 Buildings–Operation by Owner or Lessee or Real Estate Management Firm: All Other Employees to the temp agency’s policy, but 9015 is not added to client’s policy.

b.    A temp agency employee is assigned to a public employer taxing district (PEC employer) or a public employer state (PES employer). Temp agency employees providing services to clients who are PEC employers or PES employers are classified by private employer classification codes. Public employer classification codes cannot be added to a private employer’s policy.

i.      For example, the temp agency provides a city with clerical employees. The clerical employees for the city are classified to 9444 Public Employee Clerical and Clerical Telecommuter. However, 9444 cannot be added to the temp agency’s policy. Since the employees are performing clerical duties, BWC adds classification code 8810 to the temp agency’s policy.

ii.     Another  example, the temp agency provides a food service employee to the city’s police department. BWC will add classification code 7720 Police Officers and Drivers to the temp agency’s policy.

c.     The client does not have a BWC policy number. BWC will add the classification code to the temp agency’s policy based on the occupational hazards of the contract or job performed.

d.    The client is self-insured. BWC will add the classification code to the temp agency’s policy in the same manner as if the client were in the state fund.

C.   Temp agency premium payment and payroll reporting.

1.    The temp agency will follow the guidelines outlined in the Prospective Billing Installment Payments policy for paying premium.

2.    The temp agency will follow the guidelines outlined in the Payroll True-Up policy to reconcile estimated payroll with actual payroll and pay any premium due.

D.   Temp agency premium audit.

1.    BWC may verify that temp agencies are properly reporting their employee payroll through periodic audits.

2.    Auditors will verify the temp agency is reporting payroll to the proper classification codes and that the proper classification codes are assigned to the temp agency’s claims.

3.    BWC requires temp agencies to keep detailed payroll records for premium audit. Temp agencies are required to show employees’ reportable payroll in the following order:

a.    Client BWC policy number;

b.    Classification code;

c.     Job duties; and then

d.    Quarter and policy year.

E.    Digital network staffing platforms:

1.    Any entity that, as part of its trade or business, uses a digital network staffing platform to connect individuals to clients to perform services on a temporary basis, and derives revenue or otherwise benefits from providing such individuals, is a temp agency.

2.    Individuals using a digital network staffing platform to connect to a job are employees of the temp agency using the digital network staffing platform to connect said individuals to clients.

F.    Resolution of complaints.

1.    Employer complaints are processed under the General Employer Complaint Policy.

2.    BWC has not identified any extenuating circumstances specific to temp agencies.